Financial commentary of Daniel Wüest (CFO)


The 2021 financial year was characterised by a dynamic and demanding environment with changing framework conditions, the effects of which are partially reflected in the financial reporting. The sale of the Windows Division, which generated a high liquidity inflow and a considerable accounting profit for Arbonia, led to a resegmentation in the financial reporting. The integration of the former Sanitary Equipment Division into the Doors Division and the retainment of the HVAC Division created two divisions of roughly equal size. Arbonia also purchased three companies in the reporting year (the Spanish distribution company Cicsa, the Serbian ventilation system manufacturer Termovent, and the German glass manufacturer GVG), which were all integrated into the consolidated financial statement over the course of the 2021 financial year. At the end of November 2021, Arbonia also announced the planned relocation of the radiator production with the subsequent closure of the site in Tubbergen (NL), which incurred one-time special operative costs of around CHF 9 million on the EBITDA level and an additive impairment of non-current assets of around CHF 4 million on the EBIT level in the 2021 reporting year. In addition, the high material price increases as well as the partially impaired supply chains left their mark in the financial key figures.

For the above-mentioned reasons, the financial commentary has been prepared on the basis of the two continued divisions HVAC and Doors and supplemented by values taking into account one-time effects (as stated) where they differ.

Revenue development

In the 2021 reporting year, Arbonia achieved a net revenue of CHF 1186.2 million, which represents an increase of +14.2% compared to the previous year (CHF 1038.4 million) and an increase of +12.1% compared to 2019 (CHF 1057.8 million), the last year not affected by COVID-19. Adjusted for currency and acquisition effects, the growth was +11.6% compared to the previous year or 13.4% compared to 2019; as a result, the guidance of around 8% organic growth for the 2021 financial year and the medium-term organic growth of at least 5% communicated in the context of Capital Market Day were considerably exceeded in both cases. At the same time, the HVAC Division achieved a particularly strong organic growth of 16.1%, while the Doors Division grew by 6.9%. In the HVAC Division, the price effects were slightly higher than the volume effects, whereas the situation was the opposite in the Doors Division. In the HVAC Division, the traditional products (radiators) as well as the growth products contributed to the very high organic growth with around 15% and 17% respectively. In the Doors Division, the Wood Solutions Business Unit with an organic growth of around 8% grew twice as fast as the Glass Solutions Business Unit with around 4%.

At the Group level, organic growth was 7.2% in the second half of the year compared to 16.5% in the first half. The still strong organic growth in the second half of the year is all the more remarkable because the second half of 2020 was already very strong due to the catch-up effects of the lockdown in the first half of the year. In addition, the price increases implemented in 2021 had not yet fully taken effect in the second half of the year. The organic growth of +11.6% on the Group level in the reporting year was almost equally split between volume effects and price effects. The main drivers for the strong revenue growth were all target markets of Arbonia, especially the two core markets of Germany and Switzerland; however, Benelux as well as the Southern and Eastern European markets also showed a strong growth.

In the reporting year, the HVAC Division acquired the Spanish company Cicsa, a distribution company for design and bathroom radiators in the Iberian region, to expand its geographic presence and also acquired the Serbian company Termovent, a producer of ventilation systems for industrial applications in the health, food and semiconductor industries, among others, to increase its product range and expand its geographic presence. Together, the two acquisitions contributed around CHF 13 million to the revenue of the HVAC Division. The Doors Division acquired the German company GVG Deggendorf, a former glass supplier of the Glass Solutions Business Unit, to increase its vertical value-added chain and secure supplies. In the months of belonging to Arbonia, this acquisition contributed around CHF 5 million in revenue to the Glass Solutions Business Unit of the Doors Division in the reporting year. After the sale of the Windows Division, the Polish roof window company Skyfens remained in Arbonia, generating revenue of around CHF 4 million in 2021. In total, the three acquisitions and Skyfens contributed around CHF 22 million to the revenue in 2021.

Further increase in profitability

The Group result of the continuing operations without one-time effects improved by 46.2% to CHF 41.1 million compared to the previous year (CHF 28.1 million). The reported Group result, however, decreased slightly compared to the previous year from CHF 29.7 million to CHF 27.5 million. The profit per share was therefore CHF 0.40. The Group result (continuing and discontinued operations) was CHF 138.7 million compared to CHF 44.9 million in the previous year, whereby CHF 99.1 million is the profit realized by the sale of the Windows Division.

On the costs side, particularly the higher prices for raw materials and semi-finished goods were noticeable, causing the materials expense ratio to increase by 2.6 percentage points from 43.7% to 46.3% in the reporting year. Thanks to increased productivity again, which was reflected in a staff ratio reduction (without one-time effects) of 1.3% points from 33.2% to 31.9%, as well as in a reduction of lower other operating expenses (without one-time effects) of 0.8 percentage points to 13.4%, it was not only possible to maintain the EBITDA margin but to increase it by 0.3 percentage points to 11.3%. The announced closure of the Tubbergen (NL) site led to one-time costs in the amount of CHF 8.8 million, which mostly arose as personnel expenses and were classified as a one-time effect. The currency translation differences in the revenue and the costs had only a slight effect in the reporting year because in particular the EUR annual mean rate was not subject to any great variations compared to the previous year.

Thanks to increased productivity and the possibility of passing on price increases to the customers, it was possible to increase EBITDA without one-time effects by 17.4% to CHF 134.3 million in the reporting year (previous year: CHF 114.5 million), whereby the EBITDA margin improved from 11.0% to 11.3%.

Both divisions achieved an EBITDA margin of over 11% without one-time effects, whereby the Doors Division was able to achieve a margin increase of 0.8 percentage points with 13.8% compared to 2020, while the HVAC Division just managed to maintain the previous year's margin of 11.3% at 11.2%. The reported EBITDA is CHF 124.7 million (previous year: CHF 116.3 million), which corresponds to an increase of 7.2% and reflects the one-time effects of almost CHF 9 million, mostly resulting due to the relocation/closure of the production in Tubbergen (NL).

Despite higher depreciations and amortisations of around CHF 5 million compared to the previous year, it was possible to increase EBIT without one-time effects by almost CHF 15 million from CHF 52.1 million to CHF 67.0 million, which corresponds to a percentage increase of 28.6%. At the same time, it was possible to increase the EBIT margin by 0.6 percentage points to 5.6%. Due to the relocation/closure of Tubbergen (NL), impairments in non-current assets of CHF 4.0 million occurred, so that the reported EBIT of CHF 53.3 million remained practically unchanged compared to the previous year (CHF 53.9 million in 2020).

The net financial expense figure decreased compared to the previous year by CHF 3.5 million from CHF 12.9 million to CHF 9.4 million, due to lower currency losses on the one hand and to lower financing costs on the other. Some of the proceeds from the Windows were used to repay the syndicated credit facility and thereby save interest costs; however, deposit fees were charged by the banks for some of the liquidity.

The reported income tax expense significantly increased due to the higher operating profit and thus increased Group result before taxes (EBT) in the reporting year to CHF 16.4 million (previous year: CHF 11.2 million), so that the effective tax rate markedly increased to 37.3% (28.6% without one-time effects) compared to 27.4% in the previous year. The high tax rate is due to one-time, specific circumstances, for example, because tax losses could not be activated in the reporting year. The calculated tax rate of around 26% is expected again in the coming years.

Markedly increased free cash flow from the sale of the Windows Division

The free cash flow in the reporting year is CHF 252.7 million (previous year: CHF 52.5 million), which corresponds to an increase of around CHF 200 million compared to the same period last year. The positive development, however, is due to the cash inflow from the sale of the Windows Division. Excluding the sales proceeds of CHF 334.1 million and the purchase of the German production site Garant in the amount of CHF 30 million, a negative free cash flow of CHF -51.4 million would have resulted. The reasons for the negative deviation from the previous year (CHF 52.5 million) are, on the one hand, a lower cash flow from operating activities, mainly the elimination of the cash flow amount of the Windows Division sold as of 31 August 2021, and, on the other hand, a substantial increase in the investments in property, plants, and equipment as well as intangible assets in the continuing operations from CHF 86.0 million to CHF 142.8 million (CHF 112.8 million without taking into account the purchase of the Garant production site) in the reporting year. This results in an investment rate (investments/revenue) of 12.0% for the reporting year, or 9.5% excluding the purchase of the Garant production facility. In 2020, the investment rate was still 8.3%. This increase in the investment rate is in line with corporate strategy, since Arbonia announced upon the sale of the Windows Division that it would accelerate and prioritize planned as well as new investment projects in 2021 and 2022. For this reason, the investment rate will also remain high again in the coming financial year, since final, significant investment amounts are also planned in this year to complete the new frame production plant and the associated capacity expansion at the German production site Prüm of the Doors Division. The accelerated investments will additionally support the profitable growth of the Arbonia Group.

Excluding the contribution of the Windows Division, the cash flow from operating activities was around CHF 10 million lower in the reporting year at CHF 84.3 million than in the previous year at CHF 94.4 million. The higher operative result in the reporting year was more than compensated for by a partially deliberate increase in the net working capital as well as higher taxes.

Increase in total assets, shareholders' equity and equity ratio, net cash, and increase in the dividend

As of 31 December 2021, the total assets of Arbonia increased compared to the previous year by around CHF 108 million to CHF 1623.3 million (previous year: CHF 1515.2 million). The increase came about from the cash inflow from the sale of the Windows Division, the increase in inventory, the trade accounts receivable, as well as the increase in non-current assets (investments and acquisitions). The shareholders' equity increased by around CHF 150 million to now CHF 1044 million, which meant an increase in the equity ratio from 59.0% to 64.3% as of the end of 2021. The increase is mostly due to the Group result of CHF 138.7 million, which consists of the disposal gain of the Windows Division and the net profit of the continuing operations

The net debt of CHF -140.6 million at the end of the financial year 2020 became a net cash position of CHF 93.2 million due to the cash inflow and the reduction in indebtedness. On the one hand, some of the proceeds from the sale of the Windows Division was used to partially repay outstanding loans and to further optimise the balance sheet in order to reduce financing costs and other operating costs in the future. In the reporting year, Arbonia also exercised the option granted in the context of the renewal of the firmly committed, currently not used syndicated credit facility of CHF 250 million to extend the facility by an additional year until 2026.

The strong balance sheet also makes it possible to distribute a 20% higher dividend of CHF 0.30 per registered share (CHF 0.25 for the financial year 2020) to the shareholders for the financial year 2021, for the fourth year in a row since the start of dividend payments. For this reason, the Board of Directors will propose to the General Meeting on 22 April 2022 to distribute a cash dividend of CHF 0.30 per registered share for the 2021 financial year, half from retained earnings and, tax-neutral for Swiss shareholders, half from capital contribution reserves.